New Inflation Figures Highlight Acute Pressure On Business Margins

Commenting on the consumer price inflation (CPI) figures for January released today, David Kern, Economic Advisor to the British Chamber of Commerce said,

"Today's figures show annual CPI inflation at 2.2% in January, which is slightly better than the market's expectations of a 2.3% figure. The new figures show a modest increase in consumer inflation and are in sharp contrast with the upsurge in factory gate price data, which was published yesterday. It is clear that British businesses are facing a sharp squeeze on their margins.

"Today's figures reinforce the need for a cut in interest rates to 5% in March. Whilst we agree that the MPC will not be able to make very large cuts in interest rates, it is important that rates are reduced modestly to 4.75-5% as early as possible. The fact that core consumer inflation (excluding energy and food) fell in January to 1.3% supports our view that business pricing power is considerably smaller than many thought and strengthens the argument for a cut in interest rates."